Will Asia’s slowdown affect our markets?
Stocks edged higher on Friday after a rough week marked by positive economic news in the U.S. but troubling economic news from Asia. For the week, the S&P and Dow notched their biggest losses of the year, 0.5% and 1.1%, respectively, while the Nasdaq edged up by 0.4%, bolstered by positive earnings in tech stocks.
Despite reports of increased strength in the American jobs market, improved corporate profits, and strong consumer sentiment, some investors feel increasing worry about Asia, Europe, and the impact higher oil prices could have on consumer spending. New reports show that China’s manufacturing sector is slowing due to reduced global demand; in Europe, Ireland slipped back into recession; and oil prices briefly spiked to the highest level in three weeks on Friday, following a report that Iranian oil exports dropped significantly this month.
The markets have posted solid returns in 2012, with the S&P up 11.09% this year. While some data indicates that we are poised for a decline, other data indicates that the markets are likely to move higher. So is it time to pull out of equities and lock in profits? Or is it better to ride things out in hopes the markets will advance further? The short answer is that no one can say for sure.
Stop and consider for a moment – if the market has peaked for the year, it would be the S&P’s cheapest price/earnings ratio in the last 34 market peaks. Furthermore, underlying trends suggest that the global economy is improving, potentially leading to further gains in the latter half of the year. According to a recent report by Ned Davis Research (NDR), a second-half recovery might send markets to levels not seen since 2007.
While it’s only natural to worry about turbulence in the market, it is important to take a deep breath and focus on overall trends and sticking to an active, long-term investment strategy. The media loves to hype stories – that’s how they get ratings. Shrewd investors, on the other hand, understand that markets move up and down, and that buying into the hype can be costly. With the news about weakening economies in Asia, we should probably expect some short-term consolidation, but that doesn’t mean drastic action should be taken.
ECONOMIC CALENDAR:
Monday: Pending Home Sales Index, Dallas Fed Mfg. Survey
Tuesday: S&P Case-Shiller HPI, Consumer Confidence
Wednesday: Durable Goods Orders, EIA Petroleum Status Report
Thursday: GDP, Jobless Claims
Friday: Personal Income and Outlays, Chicago PMI, Consumer Sentiment
HEADLINES:
EU task force head is optimistic on Greece. The head of the European Commission’s special task force on Greece believes that Greece is well on its way to improve how it monitors its finances. However, the banking system remains in difficulty and needs to be recapitalized in order to reboot the Greek economy.
Unemployment claims fell to a four-year low last week. Thursday, the Labor Department reported that weekly unemployment benefits dropped by 5,000 to a seasonally-adjusted rate of 348,000, the lowest since February 2008. The drop has coincided with the best three months of hiring since 2010, supporting the view that the job market is improving. From December through February, employers added an average of 245,000 jobs per month.
Gas prices are inching toward record highs, says AAA. Regular unleaded gas averaged $3.84 nationwide, 30 cents higher than one month ago. Drivers in eight states are already paying more than $4.00 per gallon, and prices will likely edge higher this year. Cost per gallon typically peaks in May when refineries switch to summer gasoline blends, which are more vulnerable to price shocks.
New home sales fell in February for the second straight month. The Commerce Department reported Friday that new home sales dropped 1.6% last month to 313,000 homes. Sales have fallen nearly 7% since December, a reminder that the housing market has a long way to go despite some recent gains.
QUOTE OF THE WEEK:
“Doing what you love is the cornerstone of abundance in your life” Dr. Wayne Dyer
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
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Economic News Boosts Stocks
Stocks closed flat on Friday, but all the major indices posted gains of more than 2% this week, their largest one-week advance this year. The week’s gains were primarily driven by a string of positive U.S. economic reports and signs of life in the banking sector.
Following Tuesday’s FOMC meeting, the Federal Reserve appears cautiously upbeat about the economy, though Fed Chairman Ben Bernanke acknowledged that the recovery will be a slow one and announced plans to keep the federal funds rate between 0.00% and 0.25% through at least 2014. The Fed has held interest rates near zero since December 2008 in an attempt to spur economic growth through access to cheap credit. By continuing to keep rates low, the Fed is indicating that they are taking a wait-and-see approach to the economic recovery.
Friday’s mixed trading came as traders absorbed economic reports on inflation, industrial production, and consumer sentiment. Inflation rose by 0.4%, pushed higher by rising gas prices. According to the report, consumer prices (a measure of inflation) were up 2.9% from this time last year, which is only slightly higher than the Fed’s 2% target. Part of the Fed’s job is to keep inflation from getting out of hand; if the inflation rate rises too high, it’s possible that the Fed will raise interest rates to push it back down.
Industrial production remained disappointingly flat in February after December and January gains, and the University of Michigan Consumer Sentiment Index dropped one percentage point from February’s high of 75.3, as the year’s high gas prices squeeze household budgets. Unfortunately, we can probably expect higher gas prices as we head into the summer travel season, which will continue to put pressure on the economic recovery. While gas prices don’t appear to be affecting retail sales yet, it is possible that consumers will start curbing spending if gas edges much over $4.
This year’s high gas prices are largely due to fears about a confrontation with Iran, so continued saber rattling could send prices higher. Of all the factors in play right now, gas prices are definitely a wild card, and one we’re keeping a close eye on.
ECONOMIC CALENDAR:
Monday: Housing Market Index
Tuesday: Housing Starts, Redbook
Wednesday: Existing Home Sales, EIA Petroleum Status Report
Thursday: Jobless Claims, Leading Indicators
Friday: New Home Sales
HEADLINES:
Gas prices rose for the eighth straight day Saturday to a national average of $3.835, which is only 7% lower than the record high of $4.11 seen in July 2008. Gas prices are up 17% this year and are likely headed higher as we move into the summer driving months.
Jobless claims dropped for the week ending March 10. First-time claims for unemployment benefits dropped to 351,000 from the previous week’s revised 365,000 claims, suggesting slow improvements in the labor market.
Foreclosures fell 8% in February as lenders began working through a backlog of seized properties. However, the recent $25 billion settlement with the five largest lenders means that foreclosures will likely increase in coming months as lenders begin repossessing homes again.
The government said last week that manufacturers added 31,000 jobs in February. And factories have added 227,000 new jobs over the past year. The number of hours worked by factory employees also rose 0.9 percent last month, according to Capital Economics.
QUOTE OF THE WEEK:
“Fear of failure becomes fear of success for those who never try anything new’ Dr. Wayne Dyer
Share the Wealth of Knowledge!
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.
The Thomson Reuters/University of Michigan Surveys of Consumers is a consumer confidence index based on at least 500 telephone interviews are conducted each month of a continental United States sample. It is normalized to have a value of 100 in December 1964.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
By clicking on these links, you will leave our server as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.
The Great Recession in the review mirror
Three years ago Friday, the Dow Jones Industrial Average saw one of its darkest days. Closing at its Great Recession low of 6,547, investors cringed to see how far stocks had fallen from their October 2007 high of 14,164. Since that day, we’ve experienced one of the greatest three-year runs in the history of the stock market, superseded only by the dot-com craze of the late nineties and the recovery from the Great Depression.
Stocks have returned with remarkable resilience. Between the “flash crash” of May 2010, the European financial crisis, the downgrade of the U.S. credit rating by Standard and Poor’s, fear of default by the U.S. government, high gas prices, and supply disruptions surrounding the Japanese tsunami, it’s amazing we’ve made it to where we are.
When you look at both the climb we’ve seen and the challenges we’re facing, it’s not surprising that many analysts are calling for a pullback in the near future. Even so, stocks managed to hold their own last week. After a couple of rough days, Wall Street logged three winning sessions on the back of a better-than-expected employment report. The S&P eked out a gain of 0.1% for the week, while the Dow dropped 0.4%, and the Nasdaq gained 0.4%.
While Friday’s jobs report was hotly anticipated, the market’s reaction to it was surprisingly muted. The Labor Department reported that 227,000 new jobs were created while the unemployment rate remained the same as February’s at 8.3%. If so many new jobs were created, why is the unemployment rate the same? Well, while new jobs were created, the total number of job-seekers increased as more people began actively looking for work. When the job market improves, people who had previously dropped out of the hunt start applying for jobs again, affecting the unemployment rate. Clearly, while the employment situation is actively improving, we still have a long way to go.
Also supporting market performance last week was news that Greece succeeded in convincing bondholders to swap their old bonds for new ones valued at much less. In accomplishing this, Greece cleared a major hurdle to avoiding a disorderly default.
We are living during one of the most interesting times in history. Each week, as we analyze the stock market and the economy, we find both positive and negative factors to weigh when making investment decisions. We strive to do this with diligence and skill. All things considered, we trust that the same resilience that brought us to Friday will carry us into the future; even though there are sure to be bumps along the way.
ECONOMIC CALENDAR:
Monday: Treasury Budget
Tuesday: Retail Sales, Business Inventories, FOMC Meeting Announcement 2:15 PM EST
Wednesday: Import and Export Prices, EIA Petroleum Status Report
Thursday: Jobless Claims, Producer Price Index, Empire State Mfg. Survey, Treasury International Capital, Philadelphia Fed Survey
Friday: Consumer Price Index, Industrial Production, Consumer Sentiment
HEADLINES:
China has approved a $2.9 billion investment by 23 foreign institutions in its capital markets. As the Chinese economy shows signs of slowing, central bankers look to foreign investors to pick up the slack. China now has a total of $24.6 billion by 129 foreign institutional investors invested in its capital markets.
Crude oil futures rose past $108 a barrel Friday, buoyed by a good U.S. jobs report and positive news from Greece. Crude has risen from $75 a barrel in October and $96 a barrel last month on the back of rising tensions with Iran and positive economic news.
States that were hardest hit by the real estate collapse are now leading the U.S. labor market growth. Arizona, California, Florida, and Nevada accounted for 28% of the increase in U.S. employment between August and December 2011, according to Labor Department figures.
Credit Suisse is bullish on homebuilder stocks, behind the outlook is improved buyer traffic, record affordability, and improved buyer confidence, leading to increased activity in the housing market.
QUOTE OF THE WEEK:
“Determine what you believe is impossible, and then change your beliefs” Dr. Wayne Dyer
Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!
If you would like to opt-out of future emails, please reply to this email with UNSUBSCRIBE in the subject line.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
By clicking on these links, you will leave our server as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.
Stocks, Fuel, and Tax Deductions
The S&P 500 and the Nasdaq have been up for eight of the last nine weeks, though mixed economic data caused a minor decline on Friday. The S&P gained 0.28% and the Nasdaq rose 0.44%, but the Dow lost 0.04% for the week. Stocks have been the strongest positive indicator in a slew of mixed information coming at us during the last few weeks. The five-month stock rally has been built on steadily improving economic news and strong underlying fundamentals, though some strategists are calling for a pullback since indexes are hitting new landmarks and the fourth-quarter reporting period is winding to a close.
Exerting some negative pressure on both stocks and the economy, gas prices continued their march higher this week, reaching a national average of $3.74, according to AAA. Gas prices have risen more than 8% this year, influenced by ongoing Middle East tensions and a stronger U.S. economy. However, on a positive note, crude oil prices dropped Friday for the first time in days, on news that the U.S. won’t preemptively attack Iran and disrupt oil supplies. While sustained high gas prices are not something we want to see, economists continue to stress that $4 gas is not enough to derail the economic recovery. Interestingly, higher gas prices haven’t dampened American enthusiasm for cars. Automakers reported strong sales for February, especially among smaller cars as buyers try to offset increased fuel expenses. Although all makers have not reported February results, analysts expect strong sales of 1.1 million cars and trucks for the month.
Federal Reserve Chair Ben Bernanke had both encouragement and words of warning for the Senate Banking Committee this week. While expressing that the recovery is not over and that the Fed expects continued growth of 2.2% to 2.7% this year, he also urged politicians to act on key issues. Bernanke expressed that the expiration of the Bush tax cuts, payroll tax increases, and massive federal budget cuts – all coming at the same time in January 2013 – is a “fiscal cliff” that could threaten the economic recovery. We agree that these lingering political issues could have significant negative consequences if they are not addressed properly. We sincerely hope that the leaders of this nation will act for the common good, and that they will not allow political bickering to get in the way of our ongoing recovery.
ECONOMIC CALENDAR:
Monday: Factory Orders, ISM Non-Mfg. Index
Wednesday: ADP Employment Report, Productivity and Costs, EIA Petroleum Status Report
Thursday: Jobless Claims
Friday: Employment Situation, International Trade
HEADLINES:
Traders pushed up the price of Treasury debt after economic data from Europe brought back fears of a global economic slowdown. Demand for “safe haven” investments like Treasury bills often goes up on the back of poor economic news.
The Institute for Supply Management's manufacturing index fell in February to 52.4 from 54.1, a decline well below expectations. All four of the component indexes also posted declines; however, ISM’s survey chief believes that the declines are part of a generally positive trend of moderate growth.
New orders for durable goods declined a surprising 4% in January. Orders for long-lasting goods like machinery, airplanes, furniture, and appliances dropped after a special business tax treatment expired. While the news could be a sign of weakening manufacturing activity, the durable goods report is notoriously volatile and it is likely one-time factors had a significant impact.
The Conference Board Consumer Confidence Index rose in February, a significant improvement over January’s performance, and is now close to February 2011 levels. Consumers are more confident about current economic conditions than they were in January, and despite rising gas prices, they are more optimistic about the economic recovery.
5 Overlooked Tax Deductions for 2011
As you start getting your tax information together, don’t forget to look for tax deductions.
1. Charitable Mileage
Many people are aware that their charitable contributions can be deducted if they itemize their taxes. However, you can also deduct the mileage that you travel in the service of your favorite charity.
When you travel to and from the charity location, or if you are running errands on behalf of the charity, you can deduct 14 cents per mile. You also get to deduct what you pay for parking and tolls. And, if you take public transport, you can deduct those costs as well.
Just make sure you keep good records.
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2. Tax Preparation Fees
When someone else prepares your taxes, or even if you prepare them yourself using paid software, you can get a deduction for the cost. Deduct the cost of your accountant, your TurboTax software, and even convenience fees that you might be charged.
It’s worth noting, too, that financial planning fees, and fees paid for financial management, can also be deducted from your income.
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3. Property Losses
If you had a property loss, due to destruction or theft, you can deduct some of what you paid for repairs, and even for the decrease in value to your home.
You do have to follow the rules, though.
No deduction for amounts covered by your insurance company, and you have to have paid more than $100, since the first $100 you pay isn’t tax deductible.
You may have had losses due to Hurricane Irene
4. CD Withdrawal Penalties
When you withdraw money early from a certificate of deposit, it comes with a penalty. This can cut into your earnings from the CD, as well as offer annoyance. You can recoup some of that cost when you deduct the penalty on your taxes.
So, if you ended up with such a fee, make sure to remember to deduct it.
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5. Medicare Premiums
Your Medicare Part B and Medicare Part D premiums might be tax deductible as medical expenses. This can be a great help if your premiums have been on the rise.
On top of that, those who aren’t eligible for Social Security, and enroll in Medicare Part A, can deduct those premiums.
Disclaimer: Ken Mahoney is neither a tax nor legal professional. Material contained within this piece is intended for general informational purposes only and is not intended as professional counsel or investment advice, and is not to be used as such. No statement or expression is an offer or solicitation to buy or sell any products or services mentioned. Information contained herein has been obtained from sources believed to be reliable; its accuracy and completeness cannot be guaranteed. Investors are advised to contact their appropriate professional for all personal, including but not limited to retirement and estate planning, tax planning and/or corporate planning.
QUOTE OF THE WEEK:
“The magnificent Universe provides abundantly when you’re in a state of gratitude’
Dr Wayne Dyer
Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!
If you would like to opt-out of future emails, please reply to this email with UNSUBSCRIBE in the subject line.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.